Why the NHL made a mistake with this round of Expansion


In a long anticipated move, the NHL awarded their 31st franchise to Las Vegas almost exactly a year to the day after formally opening the expansion process in June of 2015, to begin play in the 2017-18 season. After 16 groups reportedly received applications last summer from the NHL, only Bill Foley’s Las Vegas group and Quebecor’s Quebec City group returned the applications (with a $1 million fee) to be considered for this round of expansion. Although it initially seemed both groups would be awarded expansion teams, with both cities either having built or building state-of-the-art facilities to house potential teams, the league’s owners decided to proceed only with Las Vegas’ bid, choosing to defer Quebecor’s application. While not officially closing the door on expansion in the somewhat-near future for Quebec City, the NHL made mistakes in both omitting Quebec City and with proceeding with expanding to Las Vegas.

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Bill Foley and Gary Bettman at the announcement of Las Vegas as the 31st NHL franshise

 

There are a few obvious factors that contributed to the NHL’s eventual expansion to Las Vegas. Las Vegas is the biggest market in both the United States and Canada that currently does not host a major professional sports franchise, it had the support of the deep-pocketed ownership group of Bill Foley which promised to build a suitable arena for their team to play in, and a Las Vegas team would play in the Western Conference, furthering the NHL’s goal of geographic balance. It was clear from last June that any serious attempt by the Bill Foley group would land Las Vegas a team, and a few weeks ago, their vision became reality with the anticipated announcement coming just before the NHL’s annual awards ceremony in Las Vegas.

 

While Las Vegas currently does not have any major professional sports options, its metropolitan population of less than two million residents does not exactly jump off the page. And despite having seen tremendous growth from 2000-2010, and despite continuing assertions from Las Vegas supporters that it is a growing region, that trend has stopped. In fact, Las Vegas has seen a decline in their population since 2013. It is roughly the size of Columbus, Ohio (21st largest metro in the NHL), a city that has been struggling for the better part of two decades to fill Nationwide Arena when the Blue Jackets are in town; and Columbus has a few clear advantages over Las Vegas in terms of supporting hockey at the NHL level.

 

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Ohio, while maybe not considered a hockey hot-bed, is certainly not a non-traditional hockey market. The first Ohioan to appear in the NHL, Cecil Dillon, was born in 1908. If some of you Rangers fans float that name to the old-timers in your family, they just might recognize it. He broke into the NHL with the Rangers in 1930 for whom he famously didn’t miss a single game over nine seasons, broke an NHL record with 8 post-season goals during the Rangers 1933 Stanley Cup run, and finished his NHL career after one season with the Red Wings in 1940. 23 other players native to Ohio have appeared in the NHL. Yes, Las Vegas’ own Jason Zucker is a prime example of hockey’s reach, and plenty of big time players have begun to emerge from non-traditional areas, but the fact remains hockey is a fringe sport even in some areas to which it is native. Success is few and far between off of the ice for most NHL teams in non-traditional markets, and it seems unlikely Las Vegas will reverse that trend.

 

Columbus, a consistent bottom 5 team in terms of attendance, also does not have to deal with the element of a transient-majority population that Las Vegas will have to contend with. Nevada has by far the lowest percentage of native-born residents in the country at 24%. Many residents of the relatively lightly populated Las Vegas are loyal to the sports teams of their native regions. Like many others have observed, Las Vegas’ NHL team will be relying on gate revenue from away-fans at far higher rates than any other NHL market, including Florida. While Vegas may be putting people in the seats, at least during the first couple of seasons, I find it difficult to trust that they will build a healthy and thriving fan base of their own. Even a piece from an article from the Las Vegas Sun summarizes how the transient nature of Las Vegas affects the city’s civic development: “The state’s high transience means newcomers may not see a need to build community and sometimes make “decisions that reflect the lack of attachments,” she said. People might not care about nurturing institutions, like public schools or nonprofit groups, or support diversifying the economy, a process that can take years to pay off.” (http://lasvegassun.com/news/2011/nov/29/native-nevadans-remain-small-minority-among-reside/). This Las Vegas NHL franchise is certainly an institution that will require nurturing from a population that may be unwilling to do so.

 

As much as I hope hockey can one day appeal to a diverse audience, the fact remains the vast majority of those who consume the NHL product are white people. Las Vegas has a huge Hispanic population, and while I’d love to see the NHL, USA Hockey, and Hockey Canada make the effort to engage Hispanic and black populations, dropping a team into an area with a large Hispanic presence isn’t the answer to that issue, as Phoenix and Dallas have illustrated. So, unless the NHL can reverse generations of cultural trends in 15 months, Las Vegas is looking at struggling to engage over 30% of its population.

 

 

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A rendering of Las Vegas’ T-Mobile Arena

 

You may look at all of these factors individually and find other markets that deal with similar issues that have off-ice success and think these are issues that Las Vegas will be able to overcome. And maybe you would be right. However, no other market has succeeded under so many negative conditions. Yes, Buffalo is also a small market, in fact even smaller than Las Vegas, but Buffalo is a hockey-mad city, and the Sabres, even sharing the tiny market with the wildly popular Bills, are inseparably woven into the civic fabric of Buffalo and Western New York. Yes, Washington, D.C is a major transient region, but their population is triple that of Las Vegas. Yes, Los Angeles is a warm weather place, but Los Angeles is the second largest market in the United States. Warm weather teams disproportionately make up the bottom third of league attendance most seasons and the bottom third of team value and operating profit. The one advantage Las Vegas seems to have is that there are no other major professional sports franchises, but let’s backtrack to Columbus; another city that doesn’t share its market with another major professional sports franchise. The Blue Jackets are by themselves and again, struggle to get people into the building. And unlike Columbus, Las Vegas residents have plenty of other outlets to spend their entertainment dollars.

 

On the other side of this conversation is Quebec City, the applicant city that has been deferred by the NHL with no timeline for its potential reexamination. Quebec City has successfully hosted NHL in the past, only losing its team along with Winnipeg due to an unfortunate economic climate during the 1990’s in Canada. Winnipeg has since seen NHL hockey return with the relocation of the struggling Atlanta Thrashers in 2011, and they have succeeded tremendously. Quebec City’s metro is larger than Winnipeg’s, its stadium is newer and significantly larger than Winnipeg’s, its local economy is healthier than Winnipeg’s, and hockey is equally popular in Quebec City as it is in Winnipeg. Winnipeg isn’t an indication that Quebec would succeed, it is a bar Quebec City would easily vault. It would make more on gate revenue and would likely make more on their media deal, as they would play in a larger media market. The numbers are simply on Quebec’s side.

 

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The last Nordiques team

 

The reasoning behind the NHL’s exclusion of Quebec are borderline silly in some regards. The primary reason given for proceeding without Quebec seems to be the geographic balance of the NHL, and I find the exclusion of a market from a multi-billion dollar industry based on geography to be nothing short of absurd. The league should not be awarding franchises based on its geographic structure, it should be structuring around the 30, 31, 32 markets best suited for the NHL. Simple as that. Sure, it would be nice if there was an easy solution to geographic balance, but we shouldn’t be sacrificing great hockey markets because the logistics are inconvenient.

 

One argument that superficially seems like a good reason to have left Quebec out is the struggling Canadian dollar. Today, $1CA is trading to $.77US. The primary effect this has on teams operating in Canada is essentially a 23% premium on paying their players. All players, regardless of which side of the border they play on, are paid in $US (preventing the negative side effects of such fluctuations common with the Canadian dollar, i.e a contract being worth say 30% less today than what it was worth when it was signed in 2011), but most revenue received by the seven Canadian teams is of course in $CA. This also affects the league’s collective overall revenue.

 

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The Centre Videotron in Quebec City

 

The inherent instability of the Canadian dollar is something the NHL will always have to deal with. It is the price of doing business in Canada. The NHL can’t go into its shell in terms of its business dealings in Canada every time their currency dips. Canada is a rentier economy, and that is unfortunately the nature of a currency tied to that kind economy. Seven other NHL teams deal with this currency fluctuation and current relative low value and manage it just fine, and Quebec wouldn’t have any other hurdle other Canadian teams have been dealing with for their entire existence. The only real-money effect the devalued currency would have on an expansion process would be the expansion fee the NHL was to charge to any group that was to come into the league through expansion. The $500 million figure would come somewhere into the ballpark of CA$615,000,000; a major difference, sure, but I would bet that Quebec’s ownership group, multibillion dollar multimedia giant Quebecor, would not mind spending the extra money.

 

The bottom line is, regardless of what currency a Quebec City franchise would use, it would turn a profit.

 

There are other economic and factors that suggest Quebec would be a more successful franchise than Las Vegas. First, take a look at the overall economic climate in Canada. Yes, the declining price of oil has hurt the country, especially out west, but Canada is a country with a low poverty rate that provides its citizens with social safety nets and a nationalized health care system. The average Canadian has far more disposable income than the average American, and Quebec City’s economy is especially strong. Quebec boasts a diverse economy and an unemployment rate of only 4.5%, the lowest of any major Canadian city (compared to Las Vegas’ 7.3%).

 

Quebec City is a true hockey town that has been begging for a return of their beloved Nordiques since they left in 1996. And that’s no surprise to anyone familiar with the NHL, as the grassroots organization Nordiques Nation has spent the last half decade making sure every hockey fan knows where the NHL unquestionably should have expanded next. You don’t need to build a fan base in Quebec, you have one in waiting. You don’t need to hope hockey will work there, you know it has, does, and will. Putting numbers aside (I know a phrase not used by the NHL Board of Governors when making decisions like this), hockey belongs in Quebec City. I want to see a league of the best hockey cities on the continent. I want the NHL to be a true reflection of the game of hockey. And it’s not that I don’t want the sport to grow to non-traditional markets, but I think before we try to build interest in Miami and Phoenix and Las Vegas, we should be serving the hockey hot beds and allowing those who have loved the game their entire lives to consume it at the top level. The numbers work for Quebec City, and the passion is palpable. They’ve shown up all over the US and Canada to NHL stadiums from coast to coast in an attempt to get their Nordiques back, and the NHL chose Las Vegas, a town in which they hope to cultivate a group of fans circumstantially.

 

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A show of support for the Nordiques in Quebec City

 

I think there are two major factors that went into choosing Las Vegas and omitting Quebec City. First, I think the NHL chose Las Vegas as a prestige project. The NHL wanted to make a splash, and they wanted to be the first major professional league to pull the trigger on the Las Vegas experiment. The same way Bruce Ratner dragged the Nets to Brooklyn, and the same way North Korea builds massive infrastructure projects they never intend to use, the NHL is trying to score some exposure and pound their own chests over trailblazing this desert town.

 

On the other side, I think Quebec City’s predominant Franco culture might have played a bigger role than one might expect in deciding not to head to Quebec just yet. The NHL is a different, more connected league than it was the last time the Nordiques took the ice. I think there would be some disagreements over the handling of the language issue, and I think the logistics would be far more complicated than dealing with bilingual cities like Montreal and Ottawa, and far more complicated than they were 20 years ago. I think fans of the Nordiques would be rightfully upset if the NHL applied bilingual policies to their franchise (because Quebec City is absolutely not a bilingual city and shouldn’t be treated as such), but I doubt the NHL wants to have a franchise that operates primarily in a language a vast majority of NHL fans don’t speak. It would be much more difficult for casual fans and fans of other teams to stay connected to what was going on with the Quebec City franchise, and I’m sure their popularity with the casual fan would suffer, and as a result, so would their ratings for national broadcasts both in the US and in Canada. I doubt many non-Francophone players would be thrilled to have to relocate to Quebec City, and landing top free agents that hail from non-French speaking regions (so, most of them) would be far more difficult for the Nordiques than most franchises. I’m not trying to stoke any conspiracy fire, but it certainly could have been a factor that few if any people (at least outside of Quebec) have considered.

 

Las Vegas probably won’t be an immediate failure. Novelty will propel them for the first handful of years and probably keep a pro-Vegas crowd in the stadium. However, before too long, I imagine local interest will wain to levels you’d expect in a small desert city. The crowds most nights will have huge proportions of away-fans, and the Vegas crowd will probably be outnumbered on many occasions. I’m sure casino goers will be receiving tickets as comped prizes, and you’ll have high rollers coming in with 5 minutes left in the first period and leaving before the second intermission. I think that within 5 years, Las Vegas will have the worst atmosphere in the NHL. I think it will be another black eye on the NHL, and one they will refuse let mercifully die as they do with other failed non-traditional market experiments.

 

I do not have any bias against Las Vegas. Nevada is a beautiful and unique state, and it would be nice to see a major professional sports team thrive there; unfortunately, I feel I can say with some confidence, I don’t think it’s going to be this team. Thankfully for Vegas, the NFL is also knocking on its door, I’m sure the NBA will be there within a few years as well, and I think both of those projects will be somewhat successful. But as for the NHL franchise, if it goes as poorly as I think it will, Quebec might not have to have its expansion application revisited.

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About Pan Karalis

Pan is a recent graduate of Temple University and a lifelong Devils fan from Toms River, New Jersey. Professionally, he works with people with disabilities and coaches soccer in the Philadelphia area.
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7 Responses to Why the NHL made a mistake with this round of Expansion

  1. Dominic Cantin says:

    Thanks for this good work ! GO NORDIQUES GO !!!

    Like

  2. Alain Lajoie says:

    All these comments from M Karalis, are certainly the most intelligent analize of this FARCE that was the NHL expension process. Especially the Las Vegas particular situation about the fact there is no fan base of hockey, and there will NEVER be one. Also the reaction of all North America againts the non anglophone reality of the Québec city area.

    Thanks M. Karalis.

    Liked by 1 person

  3. Pat poulin says:

    Excellent text! It is by far the most reasonable one I have read about the absurdity of the expansion process.

    There is one aspect though that I think should be worth looking into…

    You see, Québec is a province of roughly 8 million People. Its largest city is Montréal, home of the legendary Canadiens…If the Nordiques were to resurface, it would probably cut the Montréal team’s revenues by 35 %. Publicly, Geoff Molson, the owner of the Canadiens, has always said that he would love to see the rivalry reborn, but in réality, it probably turns out he is not at all interested in seeing the Nords chewing 35% off his pie. I think Molson knows the retalliation would be huge against his brewery if the media found out he has been scheming all along to keep the NHL away from here.

    Pat Poulin, Quebec City

    Long time fan of the Nordiques (and sick of this endless waiting)

    Like

    • Pan Karalis says:

      Thank you for your comment, Pat. While the Nordiques would certainly pull a lot of fans from Montreal, a 35% cut into Montreal’s revenue seems high. The distance between the cities makes it unlikely Montreal would lose many season ticket holders or other fans that regularly attend, and regardless, they will sell out the Bell Center every night. Do you think their next media deal would be affected if the Nordiques pull away some of their ratings?

      Like

      • Fred says:

        First of all, thank you Pan for that excellent and rigourous article. When we consider the Montreal Canadien reality, I also think that the potential effect on their revenues will not be so disastrous. Yes, maybe the Molson family will loose a bit on secondary products sales like jersey and ugly coffee cups, but, ultimately, they will not see the difference in their immediate market. As I remember, the waiting list to get season ticket for the Montreal Canadiens is about 13 years long. It’s simple, as I see it, the Montreal Canadiens cannot satisfied every people or corporates that would love get their hands on a season ticket or a corporate box with an arena of 21 000 seats. My conclusion is, if NHL put a nhl team in Quebec city, they ensure to press the citrus at it’s maximum in term of hockey rentability in the province. It’s the same conclusion in regards of any music event in the province. Before we had 21 000 available tickets for 8 millions people and now, with the videotron center, the offer is just better!

        Finally, I completely understand your point on the french culture of Quebec city. But, as you can see it, reality has changed substantially since 1996 and the population in 2016, are way more bilingual than 20 years ago. Our English is obviously not perfect, but it’s clearly better… Again, thanks for your support and I’m sure that we both hope for a duality between the Devils and the Nords in a near future!

        Fred,
        Chronicler on Zonenordiques.com

        Like

      • Pan Karalis says:

        Thanks for checking in, Fred! Now, I understand most Quebecois, especially in an urban center like Quebec City, speak English as a second language, and I understand that wasn’t necessarily the case in the past. But when I refer to bilingualism, I don’t mean in that sense. In that case, you could consider most countries in Europe to be bilingual. As opposed to Montreal and Ottawa, which have native populations on both sides of the ethnic divide, Quebec City and its metro are predominantly French speaking natively. Now, that paragraph where I outlined why I think French was a deterrent for Quebec City, I was certainly not doing so in agreement with your exclusion having to do in part with culture. I wrote that paragraph in a certain tone to avoid coming off as a conspiracist yelling “the racist NHL is refusing to give Quebec a team because they hate French people!”. Yes, I completely understand most people in the Quebec City area speak pretty good English, and in both 2002 and 2008 my family and I were able to get around Quebec City with absolutely no French knowledge at the time. However, I don’t think Nordiques supporters should be pandering to the NHL saying “don’t worry, we speak English now!”. The NHL shouldn’t apply bilingual policies to the Quebec City franchise because most of you guys understand English, the Nordiques should operate as a French speaking team because their city and region and fan base are overwhelming natively monolingual French speakers. Now, of course I’m not Quebecois and cannot speak for you or your countrymen or your culture, but I would not let the NHL come in and push Quebec around on the language issue. I hope when Quebec finally does get a team, Pierre Dion stands up to the NHL and says that we’re going to project our public address announcements only in French, the beat will report primarily in French, and that “Finale de la Coupe Stanley” will appear on both sides of the ice. Unless of course the Quebec City region is a vastly different place than I remember and that I imagine it to be.

        Liked by 1 person

  4. Dana Lane says:

    Bill Foley never promised to build an arena for his hockey team. MGM/AEG already built the arena which he will be a tenant in. @DanaLaneSports

    Like

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